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Dec 30 Managing Cost and Maximising Profit

A friend of mine recently posted a comment as to why AirAsia is passing the cost of air bridge to their customers. An article from MalaysiaKini also wrote an opinion on how the airlines tendency of charging for everything. So I thought about this matter - managing cost and maximising profit.

These days, companies is all about passing the cost to its customers. It's one of the strategy in managing cost but it may not be the best way to do so as price is sensitive especially if your business sells on the basis of cheap or affordable pricing.

Everyone knows the infamous 2% charge for credit card used on some shops. They cheekily says it's the bank charge. While the business owners may have the right to pass on the cost but actually those business owners should absorb the cost since they want to provide the facility and convenience to their customers. Minimising cash handling in actual fact saves a lot more business cost. Furthermore, there is no transparency as to how much the bank actually charge them to begin with. Passing on the cost must be seen justifiable but in a lot of cases it does not.

Cost cutting measures most of the time is not pleasing although essential. There are myriad of ways to do so but sadly retrenching workers is the most used one by the higher management. Creativity in managing cost is the key here. Take for instance, some hawkers have resorted to maintaining prices while the cost increase so as not push away their customers. So instead of raising prices of their food, they resorted to making it a smaller portion.

The best alternative is actually to use creativity to maximise profit. Also, raising the price by adding value to it would be able to put some justification across to it. This is no easy stuff to begin with. Creativity and ideas is never easy but essential.

In the case of airlines, I've come across some interesting ideas by adding value and thereby maximising the profits.

Image credit: http://goo.gl/NKX3Rg

Checked in customers bag with early arrangement and deliver it to their hotel. This will allow a new charge service but with added value. There is no more waiting to collect the bags after the flight but also getting faster boarding time.

Sell customers special airline-branded bags. These bags can also be specifically designed to fit underneath a seat or compartment neatly. It not just about solving the overhead storage issues because after all checked bags equates to an incredible $32 billion of revenue for the airline industry each year.

The ability to resell their seats instead of paying for a change fee, or swap seats (window for aisle) with other passengers.

Special pick-up service when boarding a returning flight for visiting passengers.

Short language course with for passengers either before and after the check-in or during boarding time. Besides, wouldn't it be great to go to an airport early with the spare time used on education and minimise chances of missing flights. The possibility of expanding the courses for other subjects is potential.

Making middle seats exclusive. It's true that nobody likes the middle seat. By inviting companies like Uniqlo, Nike, Adidas, Microsoft Xbox, Google, Samsung and etc to take that seat over. The corporations will be paying airlines for the privilege of a captive audience to woo passengers with a special gift box or experience. Hey, it might be cool to seat on an Xbox seat and play prerelease games for some people. Star Wars theme seat showing all Star Wars movies throughout the trip. The list is endless with creativity.

Image credit: http://goo.gl/pOCwaV

When it comes to concept of membership, it's ripe for disruption technology. There are many interesting methods to add values to it. The Amazon Prime or Starbucks style memberships with a kind of a hybrid concept is the way to go. But more on that in my future articles. At the end of the day, there are various ways to manage cost and maximise profit using creative ideas.

I shall end with a quote from late Apple co-founder:

 “A lot of companies have chosen to downsize, and maybe that was the right thing for them. We chose a different path. Our belief was that if we kept putting great products in front of customers, they would continue to open their wallets.”